Senate Approves State Budget That Slashes Spending, Cuts Jobs

The budget compromise devised by Gov. Malloy and Democratic leaders from the General Assembly trims hundreds of millions of dollars in spending, making reductions in programs across the board. (Jessica Hill / Associated Press)

HARTFORD — The state Senate voted Thursday to approve a $19.76 billion spending plan that erases a $1 billion deficit and that Gov. Dannel P. Malloy says "changes how we do business.'' Republicans and union members decried it as flawed and incomplete.

The budget that now goes to the House of Representatives on Friday will eliminate at least 2,500 state employee jobs and substantially reduce future projected deficits. The budget has no state tax increases and reduces spending for the general fund by 4.4 percent when compared to the original budget passed last year by the legislature.

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After a three-hour debate, the Senate voted 21-15 after lawmakers made speeches about the difficult cuts that Democrats said were unavoidable to balance the budget.

Those cuts across state government include grants for municipalities, school transportation, hospitals, psychiatric clinics for children, and substance abuse and mental health services. Millions of dollars were cut for homeless services, alternative incarceration for juveniles, youthful offender services, and people with disabilities, among others.

Malloy touted the deal as the start of structural change for state government, which includes a change in how the state budget deficit would be calculated. According to the agreement, future budgets would be based on the "fixed cost drivers," such as debt service, Medicaid, pensions and other entitlements – instead of assuming what Malloy calls "autopilot" cost increases in state programs.

Malloy said the new budget will "give residents and businesses the predictability they seek as government works to live within its means.'' Malloy also called for mandatory legislative approval of labor contracts and enacting the constitutional spending cap voters approved nearly 25 years ago, but those changes were not included in the package.

On a party line vote, the Senate rejected a Republican amendment to require votes on all labor contracts, with Republicans charging that Democrats sought to protect the union workers who volunteer for Democratic campaigns in the fall.

Senate Majority Leader Bob Duff of Norwalk said lawmakers protected public education, transportation, and higher education but were forced to make cuts because state tax collections have been below expectations and caused large deficits. The plan also reduces transportation spending, a priority for Malloy, by about $33 million. And while overall municipal aid for 2017 is reduced, state aid to municipalities has increased by $109 million since 2015, according to Malloy's office.

Republicans complained that the budget cuts $43 million in state funding for hospitals. For months, the state's hospitals have battled with Malloy, who had sought even larger cuts..

"This new economic reality looks at hospitals as banks,'' said Sen. Kevin Kelly, a Stratford Republican. "Year in and year out we look at budgets that just don't work for the people of Connecticut.''

Lobbying over the bill continued in the hallways throughout the day Thursday, with businesses supporting the package and laid-off union members from District 1199 standing outside the Senate caucus rooms, asking legislators to vote "no.'' Republicans, who often clash with union members on various topics, told the laid-off employees that they will be voting against the plan.

"It's filled with difficult cuts to all branches of government,'' said Sen. Beth Bye, Senate chairwoman of the appropriations committee. "We're still recovering from a financial services recession in a financial services state. ... We wish we didn't have to make as many cuts as we did.''

The legislation approved by the General Assembly Thursday evening outlines the nuts and bolts that are required to make the $19.76 billion budget work.

While Malloy says the state will eliminate 2,500 jobs to save more than $250 million next year, Bye said on the Senate floor that she did not have an overall estimate on the layoffs. The state is using an estimate of saving about $100,000 for each position eliminated, including salary, pension, and fringe benefits.

Legislators also continued an ongoing debate about whether Connecticut's wealthiest residents are leaving, with Bye pointing out that the number of millionaires in Connecticut actually grew 22 percent from 2009 until 2015, according to Phoenix Marketing International.

The legislature's nonpartisan fiscal office has reported that the state's 50 highest individual taxpayers had $2.9 billion less in combined income in 2015 — meaning that they paid $217 million less in state taxes — helping to cause the deficit.

"But,'' Bye said, "they're still billionaires."

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Sen. L. Scott Frantz said that four Greenwich billionaires he knows who left represent a larger problem for Connecticut.

"They will never come back to the state. I know them personally,'' said Frantz, himself a millionaire investor. "They're sick and tired of being treated like second- and third-class citizens and being demonized. … Even our former governor [M. Jodi Rell] has announced she is leaving. Jeff Immelt, the GE CEO, put his house on the market [Wednesday]."

"The reason GE left is because we don't have our fiscal house in order,'' Kane said. "We have an unsustainable path, and we have no economic growth.''

In his wrap-up speech, Senate Republican leader Len Fasano of North Haven said, "It is too expensive to run a business in this state. … We have to do better. We can do better. … We have to change. This is not the new economic normal — unless you want it to be.''

The 291-page budget implementation bill, which outlines how the programs work in the $19.76 billion budget, was posted online shortly before 3 a.m. Thursday. Republican leaders were critical of the fact that the document wasn't released far enough ahead of the budget vote.

In addition to language for implementing the state budget, it includes a plan to create a retirement savings program for private sector workers whose employer does not offer a pension or 401(k) plan, pushes off raises for judges by a year and exempts non-reusable diapers and feminine care products from taxes.

The state's business community has criticized the General Assembly for past tax increases and unstable leadership, but on Thursday, the 10,000-member Connecticut Business and Industry Association backed the compromise Democratic budget. While Republicans said the plan doesn't go far enough, business leaders countered that it was a solid first step that cuts spending and does not increase taxes.

Connecticut's cities, McGee said, contain 22 percent of the state's population, but contribute less than 11 percent of the state's gross economic product.

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"We've got to have a strategy that rebuilds the economy of cities,'' McGee told reporters Thursday at the state Capitol. "I think the next big step here is an economic growth strategy in which we really focus on rebuilding the economies of cities. … That, to me, is the biggest decision looking out over the next 10 years.''